Japan has approved the introduction of feed-in tariffs for renewable energy. The scheme requires Japanese utilities to buy electricity from renewable sources such as solar, wind and geothermal at pre-set premiums for up to 20 years. Costs will be passed on to consumers through higher bills, according to a Reuters report.
Industry Minister Yukio Edano approved the program last week. Utilities will pay 42 yen (US$0.53) per kilowatt hour for solar-generated electricity, double the tariff offered in Germany and more than three times that paid in China. Wind power will be subsidized at least 23.1 yen per kWh, compared with as low as 4.87 euro cents (US$0.06) in Germany.
Reuters reported that Japan's aim to accelerate investment in safer, cleaner and self-sufficient energy is starting from a low base: renewable sources apart from large hydro-electric dams account for only 1 percent of power supply in Japan. Nuclear power accounted for almost 30 percent of Japan's electricity supply before the earthquake and tsunami on March 11 last year triggered the Fukushima disaster.
About 60 percent came from oil, coal and gas, but that share has risen to almost 90 percent as safety concerns led to all of Japan's 50 reactors being shut. The rest of Japan's electricity comes mostly from hydro. The government estimates capacity from renewable energy will increase to 22,000 megawatts by the end of March 2013, up from 19,500 MW now, with 2,000 MW of that from solar panels.
The development of wind and solar projects in Japan will generate highly attractive returns under the feed-in-tariffs, according to clean energy market research provider Bloomberg New Energy Finance. This is despite much higher costs for solar in Japan than elsewhere in the world.
Because of the attractive returns offered to investors from the new FiT, Bloomberg New Energy Finance foresees strong growth for Japan’s renewable market, specifically for solar PV. The firm projects over 10GW of new solar and 0.7GW of new wind installed by 2014, requiring investments of $12.5bn/yr over the next three years. New solar project development will take off immediately while new wind capacity will ramp up from 2015 onwards due to longer lead times in developing those projects. Japan could become the third largest solar market in the world by 2014.